Ashburn Anstalt v Arnold
A contractual licence does not create an interest in land, but a purchaser may be bound by a constructive trust if its conscience is affected.
Facts
Arnold & Co sold a property, but under the sale agreement was allowed to remain in occupation rent free until the property was redeveloped, when it would be offered a lease of a shop in the new building. The property was later sold to Ashburn Anstalt, expressly subject to the agreement, and Ashburn sought possession. Arnold argued that it had a lease, or alternatively a contractual licence that bound Ashburn.
Legal principle
The Court of Appeal held that Arnold had a lease, so it was entitled to remain. However, Fox LJ went on to consider what the position would have been if Arnold had only had a licence. He said that a contractual licence is not an interest in land and does not bind a purchaser merely because the purchaser has notice of it. A purchaser will be bound only if a constructive trust is imposed because its conscience is affected, for example where it has expressly agreed to take subject to the licence in a way that creates a new obligation. A mere stipulation that a sale is subject to a licence is not enough. Errington v Errington was wrong on this point. The decision that there was a lease was later overruled in Prudential Assurance v London Residuary Body, because the term was uncertain.
Related cases on leases and licences
- AG Securities v Vaughan; Antoniades v Villiers [1990] 1 AC 417
- Aslan v Murphy [1990] 1 WLR 766
- Berrisford v Mexfield Housing Co-operative Ltd [2011] UKSC 52, [2012] 1 AC 955
- Binions v Evans [1972] Ch 359
- Bruton v London & Quadrant Housing Trust [2000] 1 AC 406
- Errington v Errington and Woods [1952] 1 KB 290
- Facchini v Bryson [1952] 1 TLR 1386
- Hammersmith and Fulham London Borough Council v Monk [1992] 1 AC 478
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